Tinder would be worth $1.6 billion as a standalone business

Vimeo/Tinder
Dating app Tinder has grown into a monster business, and an analyst note from JMP Securities shows just how big it could get.

JMP Securities published an analyst note on March 31 for InterActiveCorp, the large internet company that owns Tinder, as well as sites like ask.com, ask.fm and match.com.

The most interesting section of the note focuses on JMP's predictions for Tinder in the future. It says that Tinder would be worth around $1.6 billion as a standalone business, a giant 20% of IAC's market cap.

JMP also looks at the future of Tinder's move towards adding revenues. Tinder introduced a "Tinder Plus" subscription service in February, which lets dedicated users pay a monthly charge for bonus features. Tinder Plus increases in price for users over the age of 30, rising to $19.99 a month in the US.

Tinder Plus limits the number of right-swipes that users have.TechCrunch

But despite the high price, JMP is optimistic about the number of users who will start paying for Tinder. It says that monetisation from Tinder could become 5% of IAC's revenue in 2016, bringing in $121 million from subscriptions. JMP also predicts that 2.2% of Tinder users will pay for Tinder Plus by 2016, with its estimate ranging from 1.4% to 3%. That's a prediction of 1.5 million paid users by 2016 — a huge base of subscribers.

JMP Securities

Tinder isn't just introducing subscription services, though. It has also started running advertising on the app, featuring its first official ad from musician Jason Derulo. Users who swiped right on Derulo's profile (meaning that they liked him) were treated to a message from the star with links to his new music video and his new song on iTunes.

JMP Securities says that Tinder could bring in $70 million in ad revenue by 2016 through the use of ads like the Jason Derulo campaign. Ads are only seen by normal Tinder members, not subscribers to Tinder Plus. The key is to get users used to swiping through multiple profiles, as then they will stumble upon ads. JMP says that Tinder was seeing 1.7 billion swipes a day as of February 2015. (It is likely that number has since dropped now that Tinder has limited the number of right-swipes users have every day unless they pay for Tinder Plus.)

Tinder also appears to have a growing and active userbase. JMP says it could reach 46 million monthly active users by the end of 2015, potentially reaching 58 million by 2016.

This chart from 7Park Data shows the rise in Tinder's monthly active users as a percentage of US mobile phone users:

The analyst note paints Tinder in a very positive light, and suggests it could be spun off from IAC in 2016:

Given the user growth and potential monetisation of Tinder, we believe IAC's Match Group could unlock its value as a stand-alone public company, and we currently value it at $3.5 billion (excluding a $1.6 billion valuation of Tinder). As to timing, we believe it depends on the success of Tinder's recent monetisation plans, suggesting the earliest could be in 2H15, but 2016 is more likely, in our view.